IRDAI Mandates Four-Tier Motor Insurance Structure for Cars and Two-Wheelers
The IRDAI has introduced a mandatory four-tier motor insurance framework for vehicles, effective December 15, 2026, enhancing customer choice.
New Delhi, November 4 (Daily Kiran) : The Insurance Regulatory and Development Authority of India (IRDAI) has announced a new requirement for a four-tier motor insurance structure for private cars and two-wheelers. This initiative aims to provide customers with tailored coverage options based on their specific needs. The new framework will take effect on December 15, 2026.
The regulatory body stated that the revised structure is designed to enhance clarity and transparency in motor insurance policies by distinctly separating different components. Under the new guidelines, motor insurance policies will be categorized into four segments: third-party liability, legal liability for passengers, personal accident cover, and on-damage cover for the insured vehicle.
Third-party liability insurance will remain mandatory, while the other coverages will be optional. However, the existing requirements for mandatory personal accident insurance for vehicle owners will continue to apply.
Additionally, the IRDAI has instructed all general insurance companies to adopt standardized policy language for private cars and two-wheelers. They are also required to implement a uniform “Customer Option Form,” allowing policyholders to select their preferred coverage.
Insurance providers must supply a customer information document at the time of policy purchase. This document will detail the coverage available under each segment and the associated premiums, enabling customers to make informed decisions about their policies.
Policyholders will have the flexibility to fill out the option form online or offline to choose their desired coverage. Current customers can also add legal liability coverage for passengers during the policy term by paying an additional premium.
While the policy structure and language will be consistent across providers, insurance companies will retain the ability to develop new insurance products and set prices for on-damage cover based on market conditions.
The IRDAI noted that this circular was issued in compliance with a Supreme Court ruling in the case of “National Insurance Company Limited vs. Thungala Dhana Lakshmi and Others.”
Moreover, the regulatory authority has directed insurers to integrate this new four-tier motor insurance framework with the “Insurance Sugam” platform, ensuring that these products are available on the platform starting December 15, 2026.
